Marginal Cost of Funds Based Lending Rate

MCLR a New Benchmark for Lending Rates in India

MCLR Applicable from 1st April 2016✔Check Current MCLR of Banks✔Read How MCLR Affects Your Home Loan

Marginal Cost of Funds Based Lending Rate(MCLR) is a Benchmark Rate reform by the Reserve Bank of India.

The Reserve Bank of India has introduced a new methodology for determining the lending rates offered by commercial banks in India and has named it Marginal Cost of Funds Based Lending Rate (MCLR).
The new internal benchmark rate MCLR will be used to compute the base rate for different tenure lending on the basis of risk profile of the borrower. As per the RBI circular dated 17th December 2017,
these guidelines shall come into effect from April 1 2016.

MCLR - Current MCLR of leading banks in India

Allahabad Bank

OVERNIGHT : 9.15%1 MONTH : 9.2 %

3 MONTHS : 9.25 % 6 MONTHS : 9.35 %

1 YEAR: 9.45 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Aspire Home Finance Corporation

OVERNIGHT : 9.1%1 MONTH : 9.35 %

3 MONTHS : 9.45 % 6 MONTHS : 9.6 %

1 YEAR: 9.65 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Axis Bank

OVERNIGHT : 8.55%1 MONTH : 8.55 %

3 MONTHS : 8.75 % 6 MONTHS : 8.85 %

1 YEAR: 8.9 %2 YEARS : 8.95 %

3 YEARS : 9 %Last Updated Date: 18 Aug 2017

Bank of Baroda

OVERNIGHT : 8.1%1 MONTH : 8.15 %

3 MONTHS : 8.2 % 6 MONTHS : 8.3 %

1 YEAR: 8.35 %2 YEARS : 8.5 %

3 YEARS : 8.65 %Last Updated Date: 18 Aug 2017

BNP Paribas

OVERNIGHT : 8.1%1 MONTH : 8.1 %

3 MONTHS : 8.1 % 6 MONTHS : 8.5 %

1 YEAR: 8.6 %2 YEARS : 8.7 %

3 YEARS : 8.75 %Last Updated Date: 18 Aug 2017

Canara Bank

OVERNIGHT : 8.9%1 MONTH : 8.95 %

3 MONTHS : 9.05 % 6 MONTHS : 9.1 %

1 YEAR: 9.15 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Central Bank of India

OVERNIGHT : 8.05%1 MONTH : 8.35 %

3 MONTHS : 8.4 % 6 MONTHS : 8.45 %

1 YEAR: 8.5 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Citibank

OVERNIGHT : 8%1 MONTH : 8.1 %

3 MONTHS : 8.1 % 6 MONTHS : 8.1 %

1 YEAR: 8.05 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Corporation Bank

OVERNIGHT : 8.35%1 MONTH : 8.35 %

3 MONTHS : 8.4 % 6 MONTHS : 8.65 %

1 YEAR: 8.75 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

DCB Bank

OVERNIGHT : 9.28%1 MONTH : 9.68 %

3 MONTHS : 10.08 % 6 MONTHS : 10.28 %

1 YEAR: 10.48 %2 YEARS : 10.59 %

3 YEARS : 10.79 %Last Updated Date: 18 Aug 2017

Dena Bank

OVERNIGHT : 8.4%1 MONTH : 8.4 %

3 MONTHS : 8.45 % 6 MONTHS : 8.5 %

1 YEAR: 8.55 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Federal Bank

OVERNIGHT : 8.9%1 MONTH : 8.95 %

3 MONTHS : 9.1 % 6 MONTHS : 9.2 %

1 YEAR: 9.3 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

HDFC Bank

OVERNIGHT : 7.85%1 MONTH : 7.9 %

3 MONTHS : 7.9 % 6 MONTHS : 8 %

1 YEAR: 8.15 %2 YEARS : 8.2 %

3 YEARS : 8.3 %Last Updated Date: 18 Aug 2017

ICICI Bank

OVERNIGHT : 8%1 MONTH : 8 %

3 MONTHS : 8.1 % 6 MONTHS : 8.15 %

1 YEAR: 8.2 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

IDBI Bank

OVERNIGHT : 8.5%1 MONTH : 8.75 %

3 MONTHS : 8.85 % 6 MONTHS : 8.9 %

1 YEAR: 9.15 %2 YEARS : 9.2 %

3 YEARS : 9.3 %Last Updated Date: 18 Aug 2017

Indian Overseas Bank

OVERNIGHT : 9.5%1 MONTH : 9.55 %

3 MONTHS : 9.6 % 6 MONTHS : 9.65 %

1 YEAR: 9.7 %2 YEARS : 9.8 %

3 YEARS : 9.9 %Last Updated Date: 18 Aug 2017

IndusInd Bank

OVERNIGHT : 8.75%1 MONTH : 8.8 %

3 MONTHS : 9.1 % 6 MONTHS : 9.35 %

1 YEAR: 9.45 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Kotak Mahindra Bank

OVERNIGHT : 8.2%1 MONTH : 8.25 %

3 MONTHS : 8.4 % 6 MONTHS : 8.65 %

1 YEAR: 9 %2 YEARS : 9 %

3 YEARS : 9 %Last Updated Date: 18 Aug 2017

Oriental Bank of Commerce

OVERNIGHT : 8.4%1 MONTH : 8.45 %

3 MONTHS : 8.5 % 6 MONTHS : 8.55 %

1 YEAR: 8.6 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Punjab National Bank

OVERNIGHT : 8.2%1 MONTH : 8.25 %

3 MONTHS : 8.35 % 6 MONTHS : 8.4 %

1 YEAR: 8.45 %2 YEARS : 8.6 %

3 YEARS : 8.75 %Last Updated Date: 18 Aug 2017

Punjab and Sindh Bank

OVERNIGHT : 8.6%1 MONTH : 8.6 %

3 MONTHS : 8.65 % 6 MONTHS : 8.7 %

1 YEAR: 8.75 %2 YEARS : 8.95 %

3 YEARS : 9.1 %Last Updated Date: 18 Aug 2017

Standard Chartered Bank

OVERNIGHT : 8.45%1 MONTH : 8.75 %

3 MONTHS : 8.95 % 6 MONTHS : 9.15 %

1 YEAR: 9.25 %2 YEARS : 9.35 %

3 YEARS : 9.45 %Last Updated Date: 18 Aug 2017

State Bank of Hyderabad

OVERNIGHT : 8.8%1 MONTH : 9 %

3 MONTHS : 9.1 % 6 MONTHS : 9.15 %

1 YEAR: 9.25 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

State Bank of India

OVERNIGHT : 7.75%1 MONTH : 7.85 %

3 MONTHS : 7.9 % 6 MONTHS : 7.95 %

1 YEAR: 8 %2 YEARS : 8.1 %

3 YEARS : 8.15 %Last Updated Date: 18 Aug 2017

Syndicate Bank

OVERNIGHT : 9.3%1 MONTH : 9.35 %

3 MONTHS : 9.35 % 6 MONTHS : 9.4 %

1 YEAR: 9.45 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Uco Bank

OVERNIGHT : 9.2%1 MONTH : 9.3 %

3 MONTHS : 9.35 % 6 MONTHS : 9.4 %

1 YEAR: 9.45 %2 YEARS : 9.55 %

3 YEARS : -Last Updated Date: 18 Aug 2017

Union Bank of India

OVERNIGHT : 8.15%1 MONTH : 8.35 %

3 MONTHS : 8.4 % 6 MONTHS : 8.5 %

1 YEAR: 8.65 %2 YEARS : 8.7 %

3 YEARS : 8.75 %Last Updated Date: 18 Aug 2017

United Bank

OVERNIGHT : 9.25%1 MONTH : 9.3 %

3 MONTHS : 9.35 % 6 MONTHS : 9.4 %

1 YEAR: 9.45 %2 YEARS : -

3 YEARS : -Last Updated Date: 18 Aug 2017

Vijaya Bank

OVERNIGHT : 9.2%1 MONTH : 9.25 %

3 MONTHS : 9.35 % 6 MONTHS : 9.4 %

1 YEAR: 9.45 %2 YEARS : 9.5 %

3 YEARS : 9.55 %Last Updated Date: 18 Aug 2017

Yes Bank

OVERNIGHT : 8.90%1 MONTH : 9.00 %

3 MONTHS : 9.25 % 6 MONTHS : 9.30 %

1 YEAR: 9.50 %2 YEARS : %

3 YEARS : %Last Updated Date: 18 Aug 2017

Understanding The New Calculations

Possible transmission trajectory of future repo rate cuts

Computation of Marginal Cost of Funds

As per the new RBI guidelines, Indian Banks should follow the below mentioned guidelines for pricing their loans & advances:

Internal Benchmark

All the loans sanctioned or financial facilities renewed on or after 1st April 2016 will be priced with reference to the Marginal Cost of Funds Based Lending Rate (MCLR). MCLR will be internal bench mark for the bank for lending purposes.

The MCLR will consist of

Marginal Cost of Funds

Negative Carry on account of CRR

Operating Cost

Tenor Premium

Marginal Cost of Funds

The marginal cost of funds will consist of borrowing and return on net worth.

Negative Carry on Cash Reserve Ratio (CRR)

Negative carry on mandatory CRR which arises due to return on CRR balances being nil, will be calculated as under:

Required CRR X (marginal cost)/(1-CRR)

The Marginal Cost of Funds arrived at point# 3 above will be used for arriving at negative carry on CRR.

Operating Cost

All the operating costs involved in providing the loan or the financial facility, including costs of raising funds will be included under this head. The costs of providing loan process and services should be recovered separately as service fees or charges.

Tenor Premium

This cost includes all the cost due to longer tenor of the loan.

Since MCLR will be tenor linked benchmark, lending bank shall arrive at the MCLR of a particular maturity by adding the corresponding tenor premium to the sum of marginal cost of funds, Negative carry on account of CRR and operating costs.

Banks should publish the internal benchmark for the following maturities:

Overnight MCLR

One- month MCLR

Three-month MCLR

Six Month MCLR

One Year MCLR

At the same time banks have the option to publish MCLR of any other longer maturity.

Spread

Banks should have a Board approved policy deciding the components of spread charged to a customer. It should include following principle:

To determine the quantum of each component of the spread.

To determine the range of spread for a given type of loan/ category of borrower.

To delegate power in respect of loan pricing.

To maintain uniformity in these components, bank shall adopt the following broad component of spreads:

Business Strategy- will be arrived at taking into consideration the business strategy, market competition, options in the loan product, market liquidity of the loan.

Credit Risk Premium- its charged to the customer based on risk profile of the customer, expected losses, collaterals etc.

Spread should only be increased on account of deterioration of the customer risk profile. It’s not applicable to loans under consortium and or multiple banking arrangements.

Interest Rates on Loans

Actual lending rate will be determined by adding the components of spread to the MCLR. There should be no lending below the MCLR of a particular maturity for all loans linked to the benchmark.

The reference benchmark rate used for pricing the loan should be clearly mentioned in the terms and conditions of the loan agreement and or contract.

Exemptions from MCLR

Loans covered under the Government of India formulated schemes, wherein banks have to charge interest rate as per the scheme are exempted from being linked to MCLR as the benchmark for determining the interest rate.

Working Capital Term Loans (WCTL) are exempted from being linked to MCLR as the benchmark for determining the interest rate.

Funded Interest Term Loans (FITL) are exempted from being linked to MCLR as the benchmark for determining the interest rate.

Loans granted under various government schemes formulated by Government of India or any Government undertaking wherein banks charge interest rate as prescribed under the schemes to the extent of refinance is available are exempted from being linked to MCLR.

Loans to Bank depositors against their own deposit are exempted from being linked to MCLR.

Loans to bank’s own employees including retired employees are exempted from being linked to MCLR.

Loans to the CEO or Whole Time Directors are exempted from being linked to MCLR.

Fixed rate loans over 3 years are exempted from being linked to MCLR as the benchmark for determining the interest rate on loans.

Review of MCLR

Banks must review and publish their MCLR of different maturities every month on a pre-announced date with the approval of the board/committee.

Reset of Interest Rates

Banks may specify interest rate reset dates on their floating rate loans. Banks will have the option to offer loans with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of MCLR.

The MCLR on a loan the day it is sanctioned will be prevailing MCLR and will be applicable till the next reset date, irrespective of the changes in the benchmark during the interim.

The period of reset should be one year or lower. The exact periodicity of the reset should be part of the terms of the loan agreement or the contract.

News & Articles

DigiLend, a fin-tech startup based out of Mumbai, has raised Rs 2 crore in its new funding round from two non-banking financial services companies. The startup has risen funding from Mumbai-based InCred Finance and Temasek-owned Fullerton India Credit Company Ltd. DigiLend will now be using the newly infused funds to pilot its product in the personal loan segment. The company provides personal loans up to Rs 5 lakh with an annual interest ranging from 12-30% and for a period of 6 to 36 months. The start-up enables individuals to avail of unsecured personal loans for education, travel, holidays, wedding, home improvement, debt consolidation, emergency needs, etc. InCred, which invested in DigiLend, has acquired peer-to-peer lending platform Instapaisa after investing in the start-ups last year. The firm has also invested in several fin-tech start-ups for around 10-15 percent stake, said founder Bhupinder Singh.

The state consumer commission on Wednesday booked Central bank of India for refusing to hand over deeds of a house to a family despite having repaid in lump-sum a student loan of Rs 7 lakh. The bank's legal notice shocked the complainant's wife and she suffered a paralysis attack and died. The bank will now pay the family around Rs 25,000 as costs of the appeal. A loan of 12.5 lakh was taken by Harpahelsingh Bhansingh in 2001 for a five-year term, to send his daughter abroad to study. For security against the loan, he mortgaged his house in Kopri colony, Thane. However, his daughter failed to obtain a work permit and returned to India, after which the bank deemed the loan a non-performing asset and demanded a one-time settlement of 7 lakh. The bank failed to return the title deed of the mortgaged property and a no-dues certificate to the family. Bhansingh moved the district forum, which deemed the fresh notice illegal and demanded return of the title deeds of the property. The commission dismissed bank’s appeal. The bank should have been "ever vigilant" to protect the consumer's interests, the commission said, ordering it to compensate Bhansingh's family.

Housing finance companies are likely to face some tough competition in the mid-to-large ticket housing segment of above Rs 30 lakh. According to the India Ratings and Research agency (Ind-Ra) HFCs may find it challenging to expand their portfolio in the large ticket housing segment. "HFCs will face a margin contraction in this segment, limiting the spreads to absorb all the costs, while trying to generate reasonable returns," Ind-Ra said in a report. "This space is characterised by limited competition from banks and hence offers reasonable risk adjusted returns," it said. Ind-Ra estimates just about one-fifth of the total HFCs’ portfolio accounts for ticket size higher than Rs 50 lakh.

PSU lender Indian Bank today said it will offer interest rate of 4 per cent per annum on savings account with incremental balance of over Rs 50 lakh and 3.50 per cent per annum for deposit up to Rs 50 lakh. The lender in a statement said “it has introduced two tier interest rate structures for saving bank accounts and will offer 4 per cent interest per annum for incremental balance over Rs 50 lakh and 3.50 per cent per annum for balance up to Rs 50 lakh.” The bank said that the new interest rates will be effective from August 16, 2017. Recently SBI has slashed interest rates on saving account deposits by 50 basis points. However, it continues to offer 4 percent interest rates on savings account balance of Rs 1 crore and above.

SBI’s June quarter earnings fell 20 percent on a non-comparable basis but if the number of merged entities were taken into account it rose more than four times. But, its overall financials continued to deteriorate. Along with the bad loans, the sudden surge in the retail lending portfolio of the banks affected the bank’s earning. Profit on the consolidated banks’ accounts rose 435% rise to Rs 2006 crore, from Rs 374 crore net a year earlier, Chairman Arundhati Bhattacharya told reporters. “You cannot compare merged entity with the solo because there is an alignment of books that is going on," Bhattacharya told reporters. "This one quarter we have only spent to getting our house in order whether it is data merger, people transfers, whether it is reorganisation of the branches, so all of that has happened.” The merger took a toll on bank’s recovery. But the bank admitted to the mess the merger has created and is confident it could bounce back.